Aug 28, 2012 - 3:09pm

The Climate Institute cautiously welcomed today’s announcement by the Government linking Australia’s carbon laws to those of the European Union (EU).

“While our preference is for a longer term price floor than in current legislation, linking with the world’s biggest carbon market is welcomed so long as it is combined with strong policies for clean energy and energy efficiency,” said Erwin Jackson, Deputy CEO of The Climate Institute.

“Carbon and clean energy laws need to limit carbon pollution to ensure Australia does its fair share towards avoiding dangerous climate change and allowing the nation to prosper in a zero-carbon global economy.”

“Credible carbon laws are needed to unlock investment in clean energy, drive domestic emissions down, and build political support for market-based mechanisms.”

“Without a carbon price floor or strong limits on the import of international offset credits from developing countries, Australian carbon prices would fall to single digits in 2015.”

“A single-digit carbon price risks locking in the polluting technology of the past and does not prepare Australia for a low-carbon economy.”

“No other major economy has coupled its domestic carbon price wholly to the international offset market. The EU has strong limits on international offsets, while California and South Korea appear likely to ban them all together until at least 2020.”

“Linking with the EU’s carbon laws and limiting the use of carbon credits from developing countries should help to ensure Australia’s carbon laws don’t become a toothless tiger in 2015.”

Based on current forecasts, a European link would see Australian carbon prices in the order of $15-$20/tonne in 2015.

“These prices still don’t reflect the long-term benefits associated with reducing emissions and driving investment in clean energy today," Jackson said. "This is why additional policies such as the Renewable Energy Target and the proposed national Energy Savings Initiative are required to ensure we transform Australia’s high carbon economy.”

The Climate Institute still favours a long-term minimum carbon price (i.e. a price floor) - one that provides investors with more predictability than the minimum three years in current legislation.

While it does not help an oversupplied international offset market, linking to the EU would ensure that the price paid by Australian firms matches those paid by EU firms.

“The Climate Institute will analyse the detail of today’s announcement and more fully examine its implications for Australia’s transition to the low pollution economy and our ability to achieve the bipartisan supported 5 to 25 per cent reduction 2020 targets and stronger reductions thereafter,” said Jackson.